Authority Devices First Ever Binding Invoice Format

The new format to be enacted on July 22, 2018, is expected to bring consistency and uniformity

The Ethiopian Revenues & Customs Authority (ERCA) devised the first binding invoice format for the valuation of customs taxes in a bid to streamline the tax administration.

The format will become effective as of July 22, 2018, and is expected to eliminate causes for ambiguity, inconsistency and reduce the time for checking and confirmation by customs personnel and importers.

The format took more than a year to finalise and it was undertaken by a team which was led by Getu Legesse, valuation and tariff classification procedure and support director at the Authority.

“The invoice gives elaborated information about the consigner and the consignee and removes any room for misunderstanding,” said Getu.

Previously, there has not been a binding standard invoice – it was predicated on the format agreed by the exporter and the importer. If the invoice fails to provide adequate information on the goods that are imported agents at the Authority will carry out physical inspection.

During the study, feedbacks were taken from stakeholders such as private players, Customs Transistors’ Association, the Commercial Bank of Ethiopia (CBE), Ethiopian Chamber of Commerce & Sectoral Associations and the customs division of the Authority. In devising the format, experiences from East African countries such as Kenya and Uganda were taken into consideration, as well as the United States.

“It is open for further development,” said Getu.

The valuation of customs taxes is carried out on the Ethiopian Customs Valuation System (ECVS) based on the information provided on the invoice. The system came online half a decade ago, replacing the CD-based valuation for the price of commodities.

Habte Petros, president for the Ethiopian Customs Transistors’ Association established a year ago, and has close to 300 members, believes the revision will not go far in solving delays or eliminating misinterpretation.

“Such problems should have been addressed on the automated valuation system, which currently is unmanageable,” he told Fortune. “Unjustifiable taxes are imposed on importers, and it has given way to rent-seeking,” he adds, preferring the previous CD-based valuation system.

The Authority that is a decade old – formed after the merger of the Ministry of Revenues, Ethiopian Customs Authority and the Federal Inland Revenues – has been under pressure by the parliament as tax revenue has remained stagnant.

It has recently ordered all commercial banks to begin collecting taxes on the fringe benefits they offer their employees. The Authority has likewise ramped up its effort to obtain payments on the expired customs guarantee of insurance banks, by freezing bank accounts and confiscating vehicles. By the third quarter of this fiscal year, ERCA has collected 133.5 billion Br from taxes.

Most imported goods are subject to customs duties calculated by the value of the goods and actual costs – which could rival the cost of the product itself. A directive by the Ministry of Finance & Economic Cooperation (MoFEC), drafted alongside the Authority, was issued late last year that partially and fully exempted travellers from duties on 351 goods.

Yohannes W.Gebriel, a legal practitioner with a vast experience of tax law and commercial matters, believes the format will be hard to impose, not to mention that the Authority has no legal power to prepare and instruct the use of a standard form for commercial purposes.

“Neither the Authority nor any other national regulator has transnational jurisdiction to impose requirements on commercial invoices for commodities that are exported to Ethiopia,” he says. “Foreign businesses have their own standard commercial invoice they use.”